Scott Sewell should not lose sleep if the greetings he receives in debut appearances as U.S. Minerals Management Service director seem muted. His audience has shrunk. There aren't as many people interested in federal offshore oil and gas leasing as there were to greet his predecessors. That's what should keep him awake nights.
So far, Sewell's performance has been standard. He meets with oil industry officials seeking more federal leasing and with environmentalists seeking less. He sets a goal of balance between the perpetual antagonists. He hopes to reduce the emotionalism so characteristic of leasing disputes.
That's fine. Sewell even says the right things about the safety of onshore and offshore oil and gas operations, the need for more U.S. production, the relatively more threatening alternative of rising, tanker-borne imports.
There are worse ways to begin work as one of the central figures of U.S. energy policy--two, to be exact. One worse way is to promise to lease nothing. The other is to promise to lease everything. Both strategies have been tried before; neither one serves national interests.
Trouble is, promising balance isn't working very well, either.
LEASING DEFERRALS
The Bush administration promised balance and deferred most OCS leasing until after the turn of the century. MMS and its parent, the Department of Interior, kept the industry guessing about leasing procedures in the meantime. With the gutted 5 year Outer Continental Shelf leasing plan complete, all that a new MMS director should have to worry about is making the sales run smoothly.
That and making sure somebody shows up.
The last two OCS lease sales have been duds. One covered the Chukchi Sea, the other the Gulf of Mexico. These are promising areas. They were not heavily damaged by the administration's OCS leasing deferral. Why the poor industry lease sale turnouts?
Sewell blames business conditions. Low gas prices have chilled operations in the Gulf of Mexico. Oil price uncertainty has moderated industry enthusiasm for technically tricky frontiers such as the Chukchi Sea, where exploration programs are behind schedule due to prolonged icing and other surprises. Industry will return to its robustly bidding self the next time around.
Maybe. Maybe oil companies, who usually base leasing decisions on economic expectations a decade or more into the future, decided to let current conditions guide them this time. Maybe oil companies, who treat offshore bidding plans with zealous confidentiality, somehow made the group decision to sit out a couple of sales.
Or maybe a significant number of major oil companies have decided that the U.S. is just too much hassle. Maybe they've decided that the politics, like the economics, are better elsewhere.
WHY FIGHT?
Oil companies with valid OCS leases are finding it impossible to drill in some areas. Antidrilling state politicians want MMS to buy back leases, or simply to invalidate them if money isn't available. Coastal governments stifle drilling and production with endless lawsuits and permitting delays.
Why fight it when there are countries anxious to have their petroleum resources explored and developed? More and more major oil companies are asking that question.
Sewell seems to understand that promoting exploration and development of petroleum resources in federal land is the primary goal of his job. Oil companies should warn him that business conditions aren't the only reasons MMS directors have trouble performing well against that standard.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
